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Tax Deductions for Students

Tax Deductions for Students
Tax Deductions for Students
Line 214 Child Care ExpensesChild care costs are not claimed as a non-refundable tax credit, but as a deduction from income on line 214 of the personal tax return.  A non-refundable tax credit is always at the lowest tax rate (except in Québec), but a reduction of income would save tax at the taxpayer's marginal tax rate.In the Canadian Tax Calculator, child care costs are entered in the deductions area.  The calculator does not check to ensure that the maximum allowable amount is not exceeded.  It will provide a warning if the child care costs are being claimed by a higher income spouse.In most cases, child care expenses for an eligible child must be claimed by the parent with the lower net income for tax purposes.  If the parents are separated and share custody, each parent may usually claim a portion of the child care costs.  Where a medical doctor certifies in writing that the lower-income spouse is incapable of caring for the child due to a physical or mental infirmity, then the costs may be claimed by the higher income spouse.An eligible child is a child of you or your spouse or common-law partner, or a child who was dependent on you or your spouse or common-law partner, and whose net income in the year was less than or equal to the basic personal amount ($10,822 in 2012, $11,038 in 2013).  The child must have been under 16 years of age at the beginning of the year, unless the child was mentally or physically infirm.Allowable child care expenses are those paid for the care of an eligible child, to enable the parent to earn employment income, carry on a business, attend an eligible program at a designated educational institution for at least 3 consecutive weeks, or carry on research or similar work for which a grant has been received.  Some examples of eligible child care expenses include day-care centres and day nursery schools, some individuals providing child care services, day camps and day sports schools, educational institutions such as private schools (the portion of tuition costs relating to child care services), boarding schools, and overnight sports schools and camps.There are limits on the total amount of child care expenses that can be claimed for each child.  There are also limits on the amounts that can be claimed for expenses related to boarding schools or overnight camps.Basic annual limit for each child for child care expensesEligible children:Basic
1.Age 6 or less at the end of the tax year, for whom the disability amount cannot be claimed$7,0002.Any age, for whom the disability amount can be claimed10,0003.Age 7 to 16 at the end of the tax year, for whom the disability amount cannot be claimed4,0004.Over 16 at the end of the tax year, with a mental or physical impairment, for whom the disability amount cannot be claimed4,000
Maximum weekly claim for certain child care expensesThe maximum that can be claimed for expenses for a stay in a boarding school (other than education costs) or an overnight camp (including an overnight sports school) is:$175 per week for a child in line 1 above$250 per week for a child in line 2 above, and$100 per week for a child in lines 3 or 4 above.Annual limit for child care expenses based on incomeThe claim for child care expenses cannot exceed two-thirds of your earned income for the year.The above limits can be found in the Canada Revenue Agency (CRA) form T778 Child Care Expenses, which is filed with the tax return to make a claim for child care costs.If your costs exceed the allowable limit, a tax credit may be available for some of the costs through the child fitness tax credit.  Any eligible fitness costs which qualify as child care costs must first be claimed as child care costs, with the remainder of eligible costs then claimed through the fitness credit.Provincial Claims for Child Care CostsBecause the child care costs are claimed as a deduction from income, this reduces both federal and provincial taxes payable.  In Newfoundland and Labrador, there is a non-refundable child care tax credit in addition to the deduction from income.  The tax credit is claimed by the individual who claims the child care costs.  The tax credit is calculated by multiplying the child care costs by the lowest personal tax rate.
Child care services provided by a relativeCosts for child care services provided by a person 18 or over who is related to you are eligible as child care expenses, as long as you or another person did not claim a tax credit for that person in the following categories of the personal tax return:line 305 - amount for an eligible dependentline 306 - amount for infirm dependents age 18 or overline 315 - caregiver amountCRA Resources: Line 214 Child Care Expenses The following income tax folio was published on March 28, 2013 in consultation format to allow for feedback from the tax community.  It will be available until June 28, 2013: S1-F3-C1: Child Care Expense DeductionLine 219 Students' Moving ExpensesIncome Tax Act s. 62(2)If you have moved at least 40km to attend a post-secondary educational institution full time, then moving expenses may be deducted, but only from taxable scholarship or award income received in the year (most is now not taxable).  Moving expenses are a deduction from income, not a tax credit, so they save taxes at your marginal tax rate. Moving expenses can be claimed for the move to the educational institution at the beginning of each academic period, and for the move back after a summer break.Normally, moving expenses are only an eligible deduction for a student if the move was either to or from a location within Canada.  However, a move between two locations outside of Canada can also be an "eligible relocation" if:you are a Canadian resident (either factual or deemed) living out of the country, andyou moved from the place where you ordinarily resided, to live in another place where you ordinarily reside. 
  Line 319 Student Loan InterestIncome Tax Act s. 118.62A non-refundable tax credit for student loan interest can only be claimed by the student, even if it was paid by a related person.  Unused interest amounts can be carried forward for 5 years. 
In order for the interest to be eligible, the loan must have been obtained under the Canada Student Loans Act,the Canada Student Financial Assistance Act, ora similar provincial or territorial government law for post-secondary educationIn order for the interest to be deductible, it must have been paid by the student or a person related to the student.  However, it is only the student who can claim the interest.  If the interest is paid by a person not related to the student, then the interest is not deductible by the student.  Regarding related persons, see our article on arm's length.If an eligible loan is refinanced, it will lose its eligibility for the tax credit, unless the refinancing is done under the above-mentioned legislation.There are both federal and provincial non-refundable tax credits for student loan interest.  The tax credit is calculated by multiplying the lowest federal/provincial/territorial tax rate by the amount of the loan interest, except in Québec, where the rate of 20% is used.See Tax Court Case Lazarescu-King v. The Queen, which is a case where a spouse paid the interest and tried to claim the tax credit.See also Tax Information for Students. 
Tax Tip:  If you do not need to claim the student loan interest because your taxes are already zero, save it to claim in a future year.   

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